Calculating the return from Net Contents Control?

The biggest problem when implementing a Net Contents Control system that “everyone knows you need”, is putting together the business case for management to release the funding.  This is where the financial people have an advantage – it is easy for them to obtain funding for the new ERP system – assume a n% reduction in inventory, n days faster collections, n% efficiencies in logistics, etc.  All numbers they are accustomed to working with that can add up to millions.

But justifying an operational system is harder: the people doing the business case are not as comfortable in doing so, and data is harder to find.   So for net contents, here is the quick and easy justification… and the really nice thing is that it happens almost immediately after installing the new system… not months or years later.  Simple visibility to real time Net Contents information results in immediate improvement, and consistent visibility maintains the new level.

The visibility reduces the over-pack, without reducing the average to below label.  This is done by tightening up the curve, not just shifting it down.

From this

 

 

 

 

 

to this

 

 

 

 

 

to this

 

 

 

 

 

 

 

The math:

Total raw materials cost last 12 months:                 $

(Average net weight / declared)  – 1                         %

Reduction by 50% of overpack                                 %
Reduction * Total = Savings Year 1                          $

Almost always the savings will exceed the implementation costs by orders of magnitude. An example, with small numbers:

Annual Raw materials cost:                                          $1,000,000
Average overpack  (450 gr / 410 gr) – 1                          9.75%
Reduction by 50%  (9.75 /2)                                            4.875%
Reduction in Raw Material cost 1M *4.875             $48,750 per year.

Most of our clients have much larger numbers, but this just shows how little it takes to justify a pretty significant system!

There are a number of ancillary benefits like: improved accuracy of records, passing regulatory audits with less preparation , reduction in fines, less paperwork for operators, less storage costs for the paper, etc., .. but these are less directly quantifiable and the numbers can be disputed.  A pure reduction in material cost is easy to quantify and track.  Frankly, the hardest part of the justification is that financial people tend to be skeptical when presented with a payback period of less than 18 months… but it is the absolute truth.

Are there real savings to be had from at-line SPC in Food Processing?

The quick answer is probably.  Like anything else, it depends on the current state at the company in question – but in 20 years, I have never seen a food processor that could not derive financial benefit from at-line data collection and statistical process control.  There are many areas where just visibility to data can facilitate extreme cost reduction – some obvious, some not-so-obvious.

SPC simply recognizes that every process has built in variability.  Monitoring variability and making information immediately available to the operator can reduce that variability.  Reduction in variability (or to put it positively: consistent product) improves product quality.  Improved product quality increases yield, and profitability.

In areas where variability from specification can cause failure in the final product, SPC has been embraced for decades – if the hole is too small for the bolt to fit through, the whole product fails.  But in food, the ramifications of excessive process variability are not quite as obvious.  In many ways, however, the financial ramifications can be far greater!

The following articulates some areas where our clients have observed significant savings; these may represent opportunities in your plant.

Net Contents Control is one of the most obvious opportunities, being both a “regulatory compliance” (cost avoidance) and “process improvement” (cost reduction) opportunity.  Given that there is always variability in filling operations (despite claims we have heard of accuracy to .001 oz), there is an opportunity to have the occasional underweight get through or have a lot average lower than declaration – both of which are regulatory breaches.  The standard procedure to fix this is to intentionally overfill; but this results in giveaway.

“So what if we overfill by a few grams?” you ask; “No biggy – pennies”.  A couple of grams per package x packages per shift x number of lines x cost (or selling price) per gram can be an astronomical number – especially when extrapolated to the year.  Tightening up the process by a single gram may pay for a complete plant system in a matter of weeks – with a coincidental increase in compliance!  We have seen this time and again.  And, although the studies were done over a couple of months with benchmarks from the first week, the most dramatic improvement is actually realized in the first few hours; derived from showing the operator her results – the rest is slow, methodical improvement.

Relying exclusively on in-line checkweighers to kick out underweights creates rework or feed – it reduces the symptoms, but doesn’t provide a long term or cost-effective remedy.  And especially in an environment where the tare is highly variable, it is an inaccurate method.

Paper charts are tedious, and subject to human error.  But most importantly, they do not represent useable data – they are simply filed away and never seen again at shift’s end.

Improved consistency ANYWHERE in the process can have a very significant effect on net contents.  Too thin may give the consumer the impression that the package is underweight.  In cereal, particle size is crucial – who wants a large amount of dust in the bottom of our cereal box – anything that can improve flake size, moisture, cook time can really affect fines.  Certainly in cheese, moisture content can affect net weight… so much so that moisture is also regulated.  The same is true, however, of any product that has moisture content.  Water, being essentially free, is an excellent ingredient as long as it does not affect quality.  What would be the financial impact of shipping 1% more H2O?

Temperature, for example, may be a HACCP/regulatory issue (as in internal temperature of meat), but too hot, or too cool, may also have significant ramifications to processing equipment farther down the line – everything is tuned to expect a certain temperature of product, and variation can literally gum up the works – causing scrap, slowdown, and downtime.

Understanding the impact of various process variables will result in process improvement which may range from shaving a few minutes off setup, to changing processes to increase throughput by simplification – all of which can keep your plant cost-competitive with other plants in the family, or competitors.

It is a truism that the more you know about your process, and the faster you know it, the faster you can adapt and avoid crisis.  Typically process knowledge also reduces setup time – allowing more time for actual product processing.  Often solutions are easy and inexpensive once you know what the critical process parameters are. Otherwise solutions are trial and error.

Food companies are beginning to embrace OEE as a key performance indicator, yet surprisingly most OEE systems available do not contain an integrated SPC system – that is like weighing yourself every day so you know how well the weight loss is going, but paying no attention to caloric intake or exercise.  You may luck out, but if you understand the impact of 100 less calories or 20 minutes more running, your chances of reaching the goal are more likely.

Monitoring of cycle time can give visibility to improvement opportunity.  Typically more consistent product can be processed faster, thereby improving yield.  What is the value of increasing your filler speed by 10 packages/minute, or palletizing 5 minutes faster per hour?

Comparing results from multiple lines, whether process or packaging, will facilitate better scheduling decisions to match machine capability to product specification or demand.  Even identical machines will have different variation characteristics which will make some products run better on specific machines or lines.

Alarming is also a significant savings opportunity.  Often a specific measurement may be a leading indicator of problem potential further down the line.  As an example, a 5 degree drop in temperature in mixing may cause problems in the later forming operations.  Knowing that the temperature has been exceeded early will reduce the downtime or the waste at the forming operation.

And last, but not least, correlating process and quality data allows you to discover intra and inter process dependencies which enable effective planning and streamlining. You may find counter intuitive relationships:  maybe an increased conveyor speed will actually improve product consistency by speeding cooling.

SPC – it’s not just for the automotive guys any-more.

FDA Issues Interim Final Rule on Record Access Requirements for Food Firms

 

 

This just came in:

 

 

“February 23, 2012

The U.S. Food and Drug Administration (FDA) has issued an interim final rule amending its regulations on record-keeping by food firms to be consistent with FDA’s access to records. FDA’s authority for access to records was expanded by the FDA Food Safety Modernization Act (FSMA) on January 4, 2011.

The new interim final rule makes the reference to records access in the food-firm record-keeping requirements under FSMA consistent with the current statutory language in the Federal Food, Drug, and Cosmetic Act. FDA’s records access and the record-keeping requirements were first established by the Public Health Security and Bioterrorism Preparedness and Response Act of 2002.

The interim final rule also allows FDA access to records beyond those relating to specific suspect food articles if the agency reasonably believes that the other products are likely to be affected in a similar manner.

This new interim final rule is FDA’s latest step in implementing the FSMA. The expanded records-access authority is expected to improve FDA’s ability to respond to and contain safety problems with the human and animal food supply.”